The mortgage lender that lets first-time buyers borrow 5.5 times their income – and you don't need a huge deposit
Santander has become the latest bank to ease its lending rules - and homebuyers only need a 10% deposit to borrow.
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Under the new rules, Santander customers earning less than £45,000 will be able to borrow 4.45 times their income.
Those earning between £45,000 and £100,000 will be able to borrow five times their income on mortgages with a loan to value (LTV) up to 90%.
Santander customers earning £100,000 or more can borrow 5.5 times their income on mortgages up to 90% LTV.
Your LTV is how much your bank is lending you, with the rest of the property being paid for with your deposit. So if your deposit is 10%, then your LTV will be 90%.
The changes mean first-time buyers could get access to thousands of pounds more to put towards their home.
For example, a couple earning £75,000 and £50,000 respectively, with an £80,000 deposit, would be able to borrow £687,500, assuming a standard mortgage and a 25-year term.
The maximum they would have been able to borrow before the changes was £556,500 - marking a £131,000 increase.
Santander head of homes David Morris said: 'The recent changes to the loan to income rules mark the latest in a series of affordability improvements in what is quickly becoming the 'year of the buyer'.
"We're pleased to reflect these changes in our policies which, when coupled with our recent changes to affordability and a record number of properties coming to the market, will hopefully help more would-be buyers access the money they need to buy the home of their dreams.
"We'll continually look at where we can enhance and improve our lending policy to help buyers right across the board.'
The Sun's James Flanders explains how to find the best deal on your mortgage
Several other high-street lenders have loosened their lending rules in recent months, after the Bank of England (BoE) introduced new borrowing guidelines.
The new rules meant that banks and building societies could offer more high loan-to-income mortgages up to or more than 4.5 a borrower's annual income.
Nationwide now allows customers to borrow six times their annual income through its Helping Hand scheme, and you only need a 5% deposit.
However, the offer is only open to people taking out a five or ten-year fixed mortgage.
It comes after mortgage rates fell for millions last week after the Bank of England cut interest rates for the fifth time since 2020.
The base rate, which impacts interest rates offered by banks on loans and mortgages, was cut from 4.25% to 4%.
Several major lenders, including HSBC, Barclays and Nationwide, announced they would be cutting their tracker and SVR mortgage rates following the decision.
How to get the best deal on a mortgage
There are different factors that go into getting the best mortgage rate. Chris Sykes, technical director at broker Private Finance explains what you need to know.
Bigger deposit
The larger the deposit you have the lower the rates you'll have access to.
The different deposit tiers offered by lenders are generally 0-1% deposit, 5%, 10%, 15%, then generally it skips to 25% and finally cash or equity of 40% or more.
There are some exceptions in between but these are usually the bands.
Lenders then set different rates for each of these tiers, rather than having one rate for a 12% deposit and another for 14%, for example.
With a deposit above 40% there is usually no price fluctuation, which means you'd get the same rate with a 50% deposit to a 40% deposit.
Keep your credit score healthy
A better credit score doesn't necessarily mean more competitive deals, but a negative credit could mean worse deals.
For example, there may be some people with not a lot of credit as they've never had a credit card, or loan, will get the exact some deal as someone who has more credit history and a better credit score.
However, a bad credit history or score starts to limit your lenders and means you may need to move off high street to a more specialist lender which tends to offer higher rates.
If you have poor credit, look for easy ways to improve it.
Look six months before your fix ends
It's best to look at deals six months before a current rate ends. This might be to just have a chat with a broker and get things moving.
It might be that you can get a deal lined up and locked in that protects against movements in interest rates - for example if rates were to go up over the following six months. And you can also then improve the rate within that six months if rates were to go down.
How to find a good broker
A good mortgage broker is invaluable for navigating the options available to you.
The best way to find a good adviser is through personal recommendations, everyone has a friend or family member who will have recently bought or refinanced – ask them who they used and if they were happy with the service.
You can also lookup reviews of that person online to find other customer experiences too. Unbiased.co.uk is one place where people can offer their reviews.
Sort your paperwork
IF you are looking to buy or remortgage, contact a broker nice and early, as they can then guide you through what the expectations are from lenders.
This gives you plenty of time to make sure your accounts are up to date if you're self-employed and you can see if it is worth filing tax returns early.
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